[Click eStock] "Hyundai Steel, First Automotive Steel Price Increase Toward Group Companies in 4 Years"

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities expects Hyundai Steel to raise the price of automotive steel sheets for group companies in the first half of this year for the first time in about four years since the second quarter of 2017. This is due to the sharp rise in global steel and iron ore prices since the fourth quarter of last year.

According to Kiwoom Securities on the 7th, Hyundai Steel's automotive steel sheet price negotiations began in February this year, and the decision on whether to raise prices and the extent of the increase is expected to be finalized as early as March or April, or at the latest within the second quarter. Researcher Lee Jong-hyung said, "The profitability of blast furnaces, which rapidly contracted in 2019-2020, is expected to turn around in the mid to long term starting this year."

Additionally, with the strong domestic apartment pre-sale market last year and Daehan Steel's acquisition of YK Steel, supply and demand improvements in the domestic rebar market are expected this year. Furthermore, Hyundai Steel's special steel business, which had been sluggish until last year, is anticipated to normalize, leading to a continued improvement in electric furnace profitability for the second consecutive year.

Researcher Lee stated, "Reflecting this, we are raising our 2021 operating profit and net income attributable to controlling shareholders forecasts by 24% and 33%, respectively, compared to previous estimates."

The operating profit for the fourth quarter of 2020 is expected to turn positive to 101.1 billion KRW compared to the same period last year, aligning with Kiwoom Securities' previous estimates and consensus. With improvements in the steel market and entry into the seasonal peak, profitability of both blast furnace and electric furnace operations is expected to improve compared to the previous quarter, with separate operating profit projected at 81.1 billion KRW, meeting prior estimates.

Accordingly, despite the recent sharp rise in stock prices, there is still significant room for further increase.

Researcher Lee said, "Against the backdrop of a strong steel industry and rising Hyundai Kia Motors stock prices, Hyundai Steel's stock price surged more than 70% over about three months since October last year. However, compared to domestic and international steel companies, its valuation attractiveness remains high."

He added, "With the government's strong policy momentum on hydrogen energy and the parent group's strategy to expand hydrogen vehicles, the momentum from by-product hydrogen and hydrogen vehicles (fuel cell vehicles) metal separator plates remains positive for the stock price," maintaining a 'Buy' investment rating and raising the target price by 45% to 55,000 KRW from the previous level.

This content was produced with the assistance of AI translation services.